Purchase Order Accounting in AX 2012

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The accounting impact of PO happens at two stages:

1. At PO product receipt (Or packing slip) posting.

2. on PO Invoice

PO Product Receipt

When receipt is posted, two sets of ledger entry is posted:

1.  Purchase expenditure, un-invoiced – Debit
    Purchase, accrual – Credit

2. Product receipt – Debit 
    Purchase expenditure, un-invoiced – Credit 

Now, the important thing here to notice is the set of ledgers. The first set is liability booking for vendor while the second set represents open inventory. Here we notice that Purchase expenditure, un-invoiced is offsetting both accrual and receipt but they act differently. Things will be more clear after we discuss PO Invoice accounting

PO Invoice 

At the time of invoice, the accrual and product receipts are reversed and main account are hit. Following are the set of entries:

1.    Purchase expenditure, un-invoiced – Credit
Purchase, accrual – Debit

Purchase expenditure for product – Debit 

Vendor balance (Accounts payable) – Credit

2.    Product receipt – Credit 
Purchase expenditure, un-invoiced – Debit

Purchase, product receipt – Debit 
Purchase expenditure for product – Credit

So we see here that the one set of account is vendor and other is inventory. The very important to notice here is to look closely at purchase expenditure, un-invoiced account. Please note that it is not necessary that this account balance will always be 0 which it looks like. This ledger is running separately for vendor and inventory and in case of purchase return order where the inventory is issues at weighted average cost, there is a great chance that the vendor will hit by some amount and inventory will hit by some other amount unless you use marking feature.

Remember to discuss this point with client during discussion. The second point is always maintain separate account for Purchase expenditure, un-invoiced and Purchase, product receipt as i have seen many clients preferring same account for both.